Reverse charges on service tax

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Sumesh (Querist)
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05 May 2014 Dear Sir,

This query is related to Works contract Service

What are the conditions on Reverse charge mechanism. If the Service Receiver is not a Company, who is to pay service tax. Whether 50% Tax liability by Service Provider and By Service Receiver is applicable to all categories including company, firm, trust, individual etc. Please advice

Regards
Sumesh
Student IPCC

CA Ravi Kumar Murugesh

CA Ravi Kumar Murugesh (Expert)
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05 May 2014 As per notification 30/2012-ST, dated 20-06-2012, the service tax in respect of works contract; If service provider is Individual, HUF, Proprietary or Partnership firm, AOP located in taxable territory and service receiver is Business Entity registered as body corporate located in the taxable territory, then the service tax is to the extent of 50% is payable by the service recipient and balance 50% by the service provider. 'Partial reverse charge' wherein both service provider and service receiver are liable to pay service tax as per defined %.
Basically service tax is payable on value of service as calculated in rule 2A(i) of Service Tax(Determination of value) Rules, 2006. If value is not determined under rule 2A(i), then service tax can be paid under Lump sum Deduction under rule 2A(ii).
Under Lump sum Deduction service tax is payable at a specified percentage of total amount i.e.
A Original Works(i.e. New Construction) 40% of Total Amount
B Maintenance or repair or reconditioning 70% of Total Amount
C Other works Contract(excl. (A) & (B) above) 60% of Total Amount

TARUN ARORA

TARUN ARORA (Expert)
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05 May 2014 Dear Sumesh,

As per Part I(A)(v) of Notification No 30/2012:

"Services provided or agreed to be provided by any Individual, HUF or Partnership Firm.... located in Taxable territory to a a business entity registered as body corporate located in taxable territory" only then Reverse Charge is applicable.

In short:

Service Receiver : Corporate
Service Provider: Non Corporate

then reverse charge would apply in Works Contract.

For more details you can refer notification no 30/2012.

CA Ravi Kumar Murugesh

CA Ravi Kumar Murugesh (Expert)
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05 May 2014 For further doubts, if any post with your detailed query.

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